Report: SEC Dropped The Ball

Gov't Auditors Found "Serious Deficiencies" In SEC Oversight Of Bear Stearns

(CBS)  CBS News Investigative Producer Chris Scholl wrote this story for CBSNews.com.

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A new government audit suggests the Securities and Exchange Commission (SEC) effectively dropped the ball in overseeing a voluntary program to keep an eye on the troubled Bear Stearns and other massive investment banks. Government auditors found “serious deficiencies” in SEC oversight of Bear Stearns prior to its collapse in March. The Inspector General of the SEC also found that in some cases, Bear Stearns did not comply “with the spirit” of the voluntary program designed to oversee it.

Leading up to its collapse, Bear Stearns was participating along with other major investment banks in a “voluntary” oversight program begun in 2004 designed to consolidate supervision. The idea was that voluntary regulation of these banks was the only way to effectively govern their behavior because of the peculiar complexity and their international structures.

In Bear Stearns’ case, however, auditors found the company failed to comply with a number of the voluntary rules before its collapse, and that the SEC did little or nothing to pressure Bear Stearns into compliance.

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Government Audit On Securities and Exchange Commission

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What’s more, auditors say that SEC regulators failed to address a key problem at Bear Stearns - the fact that its risk managers had relatively little experience with mortgage-backed securities, where the company faced its greatest risk. “Risk management of mortgages at Bear Stearns had serious deficiencies,” the report said.

The SEC also missed key warning signs of trouble, the report said. It cited “numerous potential red flags prior to Bear Stearns' collapse,” and said the SEC “did not take actions to limit these risk factors.”

SEC Chairman Christopher Cox responded to the report announcing the immediate end of the voluntary program. In a written statement, he said “The last six months have made it abundantly clear that voluntary regulation does not work.” The voluntary “program was fundamentally flawed from the beginning, because investment banks could opt in or out of supervision voluntarily,” Cox said.

Bear Stearns’ collapse shook Wall Street. At one time, the 85-year old company was one of the largest investment banks in the United States. But heavy investing in the subprime mortgage market began to take a serious toll on the company in 2007. By the time its assets were taken over by JPMorgan Chase a year later, the company had lost more than 90% of its market value.

[txgrouch2006]

EVERYBODY TAKE YOUR MONEY OUT OF THE BANK BEFORE IT''''S TOO LATE.
Remember 1929''''s great depression.
Posted by niceface69 at 01:14 PM : Sep 27, 2008

Yes, I remember. As I remember, the bank failures were CAUSED by people rushing out and taking their money out before it was "too late."

I just heard from a financial expert that Washington Mutual actually folded because SO MANY PEOPLE WITHDREW ALL THEIR MONEY OVER THE INTERNET after they heard that WaMu might fail.

Talk about your self-fulfilling prophesies. It was so effective because with online banking, YOU DON''T HAVE TO WAIT IN LINE to take out all your money. So their cash was depleted in hours, with no long line of people around the block at the branch.

[ez2cnva]

We are now in a great time.All the idiots are being exposed.The GOP,DNC,Wall Street,Banks,Brokers and all the I want more than I can afford buyers.I think that a good old fashion depression might just what we need.Just the thing to teach all the "I CAN DO ANYTHING I WANT WITHOUT CONSEQUENCES" crowd.I say all these fools are making fools out of the rest of us.Get out and vote this Nov.

[starleo146]

Yep the republicans want their plan, and their plan is to drop the provision of not paying a golden parachute. Is this just typical to give it to them the he11 with the taxpayer, so help me the gaul of these jerks to claim they are representing their constituents HAAA save my CEO''s first and I say NO BAILOUT period, let them go down, and feel like the American people do. Everyone know it is the middle class that go and shop and buy and get loans are the ones that keep this economy afloat, but if they don''t have jobs, and and there is no money in their pockets we will fall. If I hear one more time anyone to lower taxes on these guys, and hope it trickles down to us I will scream, Reagan did it, and Bush, and now Mc Same, give me a break. Bail us out and let them fall.

[txgrouch2006]

Also we never woke up until 2 sky scrapers and 1 pentagon was destroyed...
Posted by jtdev1 at 09:32 AM : Sep 27, 2008

The result of another act of sabotage by Clinton, which Bush failed to correct.

BUSH IS TO BLAME
AND CLINTON IS TO BLAME
AND BUSH IS TO BLAME
AMND CLINTON IS TO BLAME
AND BUSH IS TO BLAME

In 2000, ON CLINTON''S WATCH, one of the 9/11 pilots was turned in to the FAA five times - the FAA didn''t even suspend his pilot''s license. WHY?

It happened ON CLINTON''S WATCH. The warnings were there. Clinton wasn''t taking the day off - he spent the day HARD at work with some girl named Monica....

Crawford, Monica, SAME DIFFERENCE!

BUSH IS TO BLAME
AND CLINTON IS TO BLAME
AND BUSH IS TO BLAME
AMND CLINTON IS TO BLAME
AND BUSH IS TO BLAME

[scoleridge-2009]

"You are doing heck of a job Cox" - George W. Bush

[jtdev1]

We NEVER wake up intil AFTER half our Navy is in flames....

------------------------------------------------------Posted by txgrouch2006




Also we never woke up until 2 sky scrapers and 1 pentagon was destroyed...

We had all the warning signs then too (PDB) but the commander was taking the day off (vacation in crawford)


Things never change...

[txgrouch2006]

TERM LIMITS FOR ALL MEMBERS OF THE FEDERAL GOVERNMENT.
Posted by txgrouch2006 at 08:46 AM : Sep 27, 2008

By executive order of President Obama, if necessary!

[txgrouch2006]

TERM LIMITS FOR ALL MEMBERS OF THE FEDERAL GOVERNMENT.

ESPECIALLY Congress.

NO MORE career crooks in Washington, DC.

[txgrouch2006]

When you find yourself asking questions such as %u201CIf the CEOs of financial companies don%u2019t know how to manage money prudently, what do they know how to do?%u201D or "If the Federal Bureau of Investigation (FBI) doesn''''t know how to investigate, what do they know how to do?" be sure that organized crime is behind the problem.
Posted by anon00 at 10:40 PM : Sep 26, 2008

When fiduciaries don''t exercise fiduciary duties, and investigators don''t investigate, THAT IS CRIME.

When it happens so systematically, and on such a large scale, IT IS ORGANIZED.

Congress IS organized crime. Most of the federal government IS organized crime - especially the high-ranking officials.

THE GOVERNMENT IS OUR ENEMY.

That''s why Obama MUST win. He''s the only chance to throw out ALL the old guard.

[txgrouch2006]

This is why Obama MUST win.

This catastrophe was the result of BOTH parties. The old guard politicians don''t care about the nation. They engaged in massive conflict of interest to weaken the protections in the financial world SO THAT THEY COULD MAKE THESE FAST-LANE INVESTMENTS THEMSELVES.

Now that their fingers are burning from the threat of THEIR OWN subprime loans that won''t get paid back, they are in a rush to BAIL THEMSELVES OUT, to the tune of millions of dollars PER LEGISLATOR in some cases.

This bailout is a HUUUUUUGE

CONFLICT OF INTEREST
CONFLICT OF INTEREST
CONFLICT OF INTEREST
CONFLICT OF INTEREST
CONFLICT OF INTEREST
CONFLICT OF INTEREST
CONFLICT OF INTEREST

for the members of Congress who are personally invested in subprime loans themselves.

[txgrouch2006]

What''s really sickening is that legislation was proposed to intervene in this mess over the years, but it was always greeted with jeers and sneers. Legislation that would have avoided this disaster was routinely thrown out.

This is like Pearl Harbor all over again - again. All the warning signs were there, all the safeguards were down. The warnings on the radar screen were ignored, lost in the communication channels way down before it even reached the commanders. The commanders were taking the day off anyway.

We NEVER wake up intil AFTER half our Navy is in flames....

[txgrouch2006]

Will all the honest politicians please stand up.
Hey, no one is standing.
Posted by tibu987 at 09:06 PM : Sep 26, 2008

Yes, NO ONE. From EITHER PARTY.

BUSH IS TO BLAME
AND CLINTON IS TO BLAME
AND BUSH IS TO BLAME
AND CLINTON IS TO BLAME
AND BUSH IS TO BLAME...

Let''s not leave ANYBODY out...

[lochlan-2009]

"A new government audit suggests the Securities and Exchange Commission (SEC) effectively dropped the ball in overseeing a voluntary program to keep an eye on the troubled Bear Stearns and other massive investment banks."

What gov. agency hasn''t "been asleep behind the wheel" (a nice way of saying soaked in corruption) these last eight years? SEC, FEMA, EPA, FDA, Justice Dept., Congress, the White House... Our country has been over run by criminals.

[tibu987]

Or, they are all standing and that lets you know how many of them are liars.

[tibu987]

Will all the honest politicians please stand up.

Hey, no one is standing.

[tibu987]

You, your children, your grandchildren, your great grand children and on and on, will be paying for this forever.

Blame the lackies in Washington from both parties for not doing their jobs taking care of their constityuents. Washington politicians are the problem, not the solution, vote for term limits and get all those old fogies out of office, they are the ones who let this country get into this mess and many others. Iraq, Afghanistan, anyone? Iran coming up. Pakistan one of the next?

I''m 72, white, a veteran.

[tibu987]

Call it anything you want, it is still a "bailout"

I oppose the bailout in any form.
Let the chips fall where they may.
A recession or depression will allow the country to regain its position with time and in better shape.
Put a freeze,lid on mortgage payments until it gets sorted out.
Many Wall Street and mortgage companies made hundreds of millions of dollars in their usurious positions and took obscene salaries and bonuses, some in the hundreds of millions of dollars.
I would not now like to see them rewarded for their avarice and mismanagement.

[javalation]

The bail-out is a short term tactic that will not succeed, unless credit swaps and other OTC derivatives are made illegal. What comes next if this $700 billion doesn''t do the job, another trillion? I would rather the strategy of putting the money into backing the FDIC and let the bank failures commence. Let the banks that made these bad choices fail along with the borrowers who borrowed beyond their means to repay. Don''t let the system fail and destroy everyone. But the politicians are fixated on this, so will most likely go through with it.

Truth is, everyone better cut expenses, build cash, treasury and gold savings and teach our children how to be frugal.

[incog-nito]

"Voluntary Regulation": That''s the Republican codeword for doing nothing.

[starleo146]

Bear Stearns in not getting bailed out. The mess the banks have now started when banks failed to follow conservative loan policies due to pressure from liberal politicians to make risky loans. Liberal policies inevitably lead to collapse.


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Posted by runningralph at 07:18 PM : Sep 26, 2008


YES IN 1999 Clinton asked for better loans and cheaper loans to help the low middle class, but in 2000 Bush came in, and has been there till 2009. So no oversight as far as SEC, and we can not fault Clinton in as much as Gramm put this forward and greed and shortcuts which the bush administration is known for has accomplished once again a failure.